The Full court's Decision
43 The Global/Impact respondents and Mr Allam appealed against the primary judge's orders. The Aristocrat parties cross-appealed. The results of the various appeals and cross-appeals may be briefly summarised as follows.
44 First, for reasons which we will soon explain, the Global/Impact respondents' appeal against the primary judge's findings that they were guilty of copyright infringement and liable to pay damages pursuant to either s 115(2) or s 115(4) of the Copyright Act was successful and the orders made by the primary judge requiring those parties to pay such damages were set aside.
45 Secondly, the Full Court found that, even if the Global/Impact respondents were guilty of copyright infringement, the primary judge erred in his assessment of damages.
46 Thirdly, the Full Court found that the infringements of copyright in the Aristocrat compliance plates which were found to be proven by the primary judge, were not as extensive as his Honour found. This was because the primary judge assumed that each of the counterfeit compliance plates was a substantial reproduction of a relevant copyright work whereas this was true of some, but not all.
47 Fourthly, the Full Court allowed the cross-appeal in so far as concerned the primary judge's failure to make any findings, or grant any relief, with respect to the Aristocrat parties' trade mark case.
48 Fifthly, the Full Court also allowed the cross-appeal in so far as it concerned the primary judge's failure to grant any declaratory or injunctive relief in respect of the Tonita respondents' infringement of copyright. The Full Court was of the view that there was a need for this issue to be reconsidered by the primary judge in the light of the Full Court's decision to set aside the damages award made against Mr Allam.
49 The Full Court observed (Allam 1 at [90]) that the primary judge's findings concerning the burning of game software onto blank EPROMs and the manufacture of counterfeit compliance plates were based substantially on the physical evidence obtained from execution of the Anton Piller orders in 2006 and 2007. However, their Honours also observed (at [92]) that the primary judge's findings of authorisation and joint tortfeasance (which were necessarily founded upon his Honour's knowledge findings) were based substantially on facts that his Honour found to have been revealed by chains of email correspondence to which Mr Andrews and Mr Cragen were parties. These included emails relating to the provision of compliance plates for use in refurbished Aristocrat gaming machines that were to be supplied by the Joint Venture to a Mr Mendelson for sale in the Russian market.
50 The Full Court referred to the 11 transactions which the primary judge found to involve infringing conduct at [95] and [96]. Their Honour's said:
[95] The "MC" (machines in clubs) category described transactions where the serial numbers on invoices for the goods supplied overseas coincided with the serial numbers of gaming machines said to be still located in various premises in New South Wales. The primary judge inferred that the gaming machines with duplicate serial numbers that had been supplied overseas contained "infringing components" of Aristocrat gaming machines (in particular, false compliance plates). The primary judge concluded that it was not possible to identify which particular components of the machines were in fact "counterfeit". However, on the basis that fake serial numbers had been used, the primary judge found that it was more likely than not that the infringing components included "counterfeit" Aristocrat game software. His Honour reasoned that there would have been little point in having fake serial numbers for gaming machines containing genuine Aristocrat software. The primary judge found that 16 gaming machines, in four transactions, involved infringing components. The transactions were: 34, 36, 48 and 54 (transaction 54 was not included in a table of relevant transactions provided by the Aristocrat parties).
[96] The "DN" (duplicate numbers) category described transactions where the Global parties and Impact parties had issued invoices for machines, the serial numbers of which were a duplicate of serial numbers on machines which had already been shipped by them in earlier transactions. The primary judge rejected the explanation given by the Global parties and Impact parties for the duplicate numbers. As with the MC category, it was not possible to conclude on the evidence which components were "counterfeit". The primary judge found that 56 gaming machines, in 7 transactions, involved infringing components. The transactions were: 13, 20, 28, 29, 41, 46 and 51.
(emphasis added)
51 It is important to note that the logic underpinning the primary judge's conclusion that the machines with false compliance plates included infringing components (in particular, "counterfeit" Aristocrat game software) was that the use of false serial numbers on the relevant gaming machines gave rise to what the Full Court described at [131] as the "reasonable inference" that they included counterfeit Aristocrat game software.
52 After referring to some of the other categories of transactions that the primary judge rejected because of the problems relating to the data matching exercise, their Honours said at [98]:
[98] It is important to note that the findings the primary judge made with respect to the four "MC" category transactions and the seven "DN" category transactions were findings with respect to indirect infringement of copyright under s 38 of the Copyright Act (infringement by dealing). These findings were based on inference in light of the "five essential propositions" to which reference has been made. There was no direct evidence of infringement. No infringing article was produced. Indeed, the Aristocrat parties did not inspect any of the gaming machines involved in any of the transactions that were found to involve infringements of the copyright that was claimed. The Aristocrat parties did not identify which components of the gaming machines in the impugned transactions were alleged to infringe the copyright that was claimed. As noted earlier, the primary judge found that, on the evidence, it was not possible to conclude precisely which components in the machines were infringing or counterfeit.
53 The Full Court concluded that the primary judge's knowledge findings were based upon his consideration of the contents of the email chains. The effect of the Full Court's decision was that it was not open to the primary judge to rely upon the email chains as he did and therefore it was not open to his Honour to find that the Global/Impact respondents were guilty of copyright infringement. It was on the basis of that determination that the Full Court set aside the orders made by the primary judge against the Global/Impact respondents. The Full Court said at [234]-[238]:
[234] The Aristocrat parties charted their own course. It may have been anticipated a variation to the usual s 136 ruling could be made after the cross-examination of opposing witnesses, but not at the time of final submissions when the course of evidence had been well completed.
[235] The primary judge failed to appreciate the real nature of the application made by the Aristocrat parties on 30 April 2011 to vary the usual s 136 ruling. As we have indicated, it was to re-open the case of the Aristocrat parties. However, to allow the emails to be introduced as evidence against respondents who had not been required to respond in any way to the email evidence, even if tendered for what their contents revealed against other respondents, was to put the respondents in an unsatisfactory position.
[236] This was a strongly contested proceeding, and each party was in a position to know and adhere to the rules of evidence and procedure to be applied. If the emails had been tendered against a particular respondent prior to 30 April 2009, then in a case of this complexity, a different course may well have been adopted by the respondent in question. It is important again to appreciate that by the usual s 136 ruling the evidence covered by that order was not admitted against certain respondents, even provisionally. The variation that occurred on 30 April 2009 during the course of the final addresses was to admit the evidence against all respondents, albeit provisionally subject to relevance.
[237] Therefore, the position of the respondents was that on 30 April 2009 they were confronted with different evidence upon which to make submissions as to liability and relevance.
[238] We do not think it was incumbent on any respondent to consider whether to re-open its or his case. The Aristocrat parties' case was completed, cross-examination undertaken and responsive evidence led by the respondents as necessary during the course of the trial. Of course, the Aristocrat parties were entitled to lead evidence as to the alleged infringing transactions and the joint venture activities, but that evidence needed to be put before the Court, subject to specific agreement by the respondents, before the case was completed. The proper course to have followed was for the evidence to be admitted provisionally at the outset against all the respondents, and then for it to have been considered in submissions. In this proceeding, it was too late to admit the evidence during closing submissions, as it was, even on a provisional basis.
54 The Full Court went on to explain why the use made by the primary judge of the chain of emails was otherwise impermissible. The Full Court said at [240]-[245]:
[240] At this point, it must be reiterated that the applicants' case at trial was primarily based on circumstantial evidence which the applicants sought to relate to a number of transactions in which some or all of the respondents were said to have exported counterfeit gaming machines to Latin America. A second critical point to note is that the significant emails tendered did not relate to the alleged infringing transactions. So in themselves, these emails could have had no relevance to proving that the alleged transactions occurred. However, they could have use in discrediting witnesses or proving the existence of a joint venture. This appears to be the way in which they were used by the parties.
[241] The primary judge accepted that the emails were not tendered as proof of the facts stated in them. It seems that the emails were tendered without express qualification at the time of their tender. Nevertheless, we consider that the primary judge did treat the contents of the chain of emails as supporting more than just the existence of the joint venture, or as going beyond being only relevant to credit. The primary judge necessarily had to connect the particularised infringing transactions with the joint venture. The only way that he could have made this connection was to draw the inference from the contents of the emails that the respondents had the tendency to act in a particular way, that is, engage in the alleged infringing transactions.
[242] The admissibility of tendency evidence is tightly regulated by Pt 3.6 of the Evidence Act. Tendency evidence is evidence of "character, reputation or conduct of a person, or a tendency that a person has or had… to act in a particular way, or to have a particular state of mind": s 97(1) of the Evidence Act. There are specific dangers in treating evidence of tendency as being probative of the occurrence of a fact in issue. In this respect, Pt 3.6 contains a number of safeguards to limit the potential misuse of tendency evidence.
[243] Under s 97(1)(a), if a party seeks to adduce tendency evidence, that party must give reasonable notice to the other party that they intend to do so. Under s 97(1)(b), the Court will only admit that evidence if it has "significant probative value". However, the threshold requirement of notice was not given at trial; the Aristocrat parties did not seek to use the emails as evidence that the respondents at trial had a tendency to engage in the infringing conduct. On appeal, it was confirmed that the parties did not seek to rely on Pt 3.6 of the Evidence Act.
[244] Whilst the emails were admitted into evidence for other purposes (namely credit, and evidence of the joint venture) Pt 3.6 guards against the evidence being admitted to show a tendency even if the evidence has a dual purpose (for example, it is also relevant and admissible to proving the existence of a joint venture): see s 95. This is to be contrasted with other provisions of the Evidence Act relating to hearsay evidence, whereby if hearsay evidence has a non-hearsay purpose (for example, is also relevant to credit) it can be admitted for its hearsay purpose: s 60. The primary judge was right in saying that he should not rely on the contents of the emails for the truth of their contents, but fell into error in doing just that in relying upon evidence that did not relate to the particularised infringing transactions. Used in this way, the evidence in the emails could show nothing more than a tendency on the part of the respondents at trial to engage in infringing transactions.
[245] The error the primary judge made was to treat the chain of emails as being able to prove the particularised infringing transactions, and to use the contents of the emails to demonstrate the connection with the particularised infringing transactions with the joint activity. Without the chain of emails, the primary judge could not have found such connection to the infringements as alleged.
55 It is important to read this last paragraph in its proper context. The principal case against the Global/Impact respondents was that they had supplied, or authorised the supply of, infringing gaming machines to customers in South America and had thereby infringed copyright. The Global/Impact respondents could only be liable on this basis if they knew, or ought reasonably to have known, that the making of the gaming machines in Australia constituted or, in the case of imported machines, would have constituted, if they had been made in Australia, an infringement of copyright: see s 38 of the Copyright Act. The Full Court found that the primary judge relied upon the chain of emails as evidence that the Global/Impact respondents knew that the gaming machines sold to their customers in South America had been made in Australia in breach of copyright.
56 The Full Court referred to the primary judge's five essential propositions (reproduced at [19] above) including, in particular, propositions 3, 4 and 5 or what we have referred to as his Honour's knowledge findings. The Full Court said at [246]:
Therefore, the findings of the primary judge in relation to the third, fourth and fifth "essential propositions" cannot be supported, and the Aristocrat parties fail to prove the alleged infringing transactions, even accepting proof of a joint venture. Looking at the primary judge's findings in relation to these propositions they extensively relied upon the chain of emails - see [751] to [752], [754] to [756], and [757] to [762]. No attempt was made by the Aristocrat parties before the primary judge or before us to prove the "essential propositions" without reference to the emails relied upon by the primary judge. It seems to be accepted that without reliance upon the emails, the third, fourth and fifth "essential propositions" cannot be supported, and the case brought by Aristocrat must fail.
57 The position in relation to Mr Allam is slightly different. The Full Court accepted that Mr Allam had infringed ATA's copyright in Aristocrat game software and Aristocrat compliance plates but found that the quantum of damages awarded against Mr Allam could not be justified. The Full Court rejected the Aristocrat parties' submission that the Full Court should itself re-assess damages against Mr Allam on a different basis or that it should remit the matter to the primary judge so that he might do so.
58 There appears to be a minor discrepancy as to the total number of impugned gaming machines in the 11 relevant transactions in the MC and DN categories (those being 34, 36, 48 and 54 in the MC category and 13, 20, 28, 29, 41, 46 and 51 in the DN category). The number of impugned gaming machines range somewhere between 46 and 56; even accounting for the "double counting" of 4 gaming machines as identified by the Full Court in Allam 1 at [291], there are at least 48 impugned gaming machines across both the MC and DN categories. The references to 48 impugned gaming machines in these reasons should be understood against that background.